The Union Budget 2023-24 has allocated ₹8,083 crore for various production linked incentive schemes. The amount is a three-fold jump from the revised budget estimate of ₹2616 crore for these schemes in FY22-23. The bulk of this money will be used for large-scale electronics manufacturing, which includes mobile devices, pharma, auto and auto components, and food processing.
Production Linked Incentive Schemes (PLI) in India have been gaining traction as a policy tool to promote manufacturing and spur economic growth. The scheme, which has been adopted by many countries around the world, offers fiscal incentives to manufacturers who invest in production capacity and technology upgrades in order to increase their competitiveness in the market.
In India, the government introduced the Production Linked Incentive Scheme in April 2020, with the aim of promoting manufacturing activities in the country. The scheme, which was part of the Atmanirbhar Bharat Abhiyan announced by Prime Minister Narendra Modi, is aimed at making India a global manufacturing hub by providing incentives for investments in the manufacturing sector.
How do PLI schemes work?
Under the PLI scheme, the Government of India provides incentives to companies investing in the manufacture of specified goods or services. The main objectives of the PLI scheme are to create employment opportunities, attract investments, and boost exports.
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The objectives are achieved by providing fiscal incentives to domestic companies, including those engaged in the manufacture of products that are essential to the Indian economy. Under the scheme, the government provides incentives to companies investing in high-tech manufacturing, electronic goods, and new technology such as 5G telecom equipment, lithium-ion batteries, and medical devices.
How did PLI schemes come into action?
The Indian Government introduced a Production Linked Incentive (PLI) scheme as a part of the national policy on electronics, to give incentives of 4-6% to electronic manufacturing components such as mobile phones, transistors, diodes, and so on. The main aim of this scheme was to encourage foreign investors to set up their manufacturing units in India as well as promote local manufacturers to expand their units, resulting in better job opportunities for the people.
It initially targeted the large scale electronics manufacturing sector in April 2020 and by the end of the year, ten more sectors including food processing, telecom, electronics, textiles, specialty steel, were also included in the PLI scheme.
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Finance Minister Nirmala Sitharaman, in the Union Budget 2021, announced that thirteen additional sectors would be added to the PLI Scheme, valid for a period of five years.
The scheme seeks to reduce import costs, improve the cost competitiveness of domestically produced goods, increase domestic capacity, and promote exports.
What are the sectors covered under PLI schemes?
PLI covers several sectors such as mobile manufacturing and specified electronic components, critical key starting materials/drug intermediaries & active pharmaceutical ingredients, manufacturing of medical devices, automobiles and auto components, pharmaceutical drugs, specialty steel, telecom & networking products, electronic/technology products, white goods (ACs and LEDs), food products, textile products (MMF segment and technical textiles), high-efficiency solar PV modules, advanced chemistry cell (ACC) battery, drones and drone components.
The scheme has helped to spur growth in the manufacturing sector and has attracted significant investment from both domestic and foreign companies. It is expected that the scheme will continue to play an important role in the development of the Indian economy in the coming years.